Hello everyone,
I’ve been developing a risk management algorithm that adjusts the stop-loss dynamically based on previous trading performance. This algorithm responds to the trading results, expanding the stop-loss during winning streaks and contracting it after losses, allowing for more calculated risk-taking while aiming to preserve capital.
I’ve included two charts below to illustrate how this works:
- Top Chart: Trade outcomes over time, demonstrating a mix of winning and losing streaks.
- Bottom Chart: The stop-loss percentage over time, dynamically adjusting to the results of previous trades.
Additionally, I’ve shared the test data (visible in the screenshot) that reflects various market scenarios such as:
- Strong winning streaks
- Choppy market conditions
- Sharp reversals to losing streaks
- Sudden large losses
- Recoveries after losses
You can correlate the graphs with this test data to better understand how the algorithm responds in different market conditions.
Key features:
- Increases stop-loss after winning trades, allowing for more risk.
- Reduces stop-loss after losses, limiting further risk exposure.
- Minimum stop-loss is capped at 2%, ensuring a base level of risk management.
I’d love to hear your thoughts on this approach. Does this dynamic stop-loss strategy align with your risk tolerance and trading style? Are there any improvements or tweaks you would suggest?
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